Financial Daily from THE HINDU group of publications
Friday, Sep 03, 2004
Financial Daily from THE HINDU group of publications Friday, Sep 03, 2004 |
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Agri-Biz & Commodities
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Technical Analysis Gold may test resistance levels Gnanasekar T.
GOLD prices are stuck in a small range near the recent highs. Gold scaled to a four-month peak earlier as record high crude prices attracted investors towards precious metals. The threat of supply disruptions from violence in Iraq may sustain historically high energy prices, which heightened gold's allure as a safe haven and spurred high-volume buying. Funds drove the market higher after an explosion killed eight people in central Moscow early this week. A weak US economic data also added to the positive sentiment for gold. August consumer confidence index fell to 98.20 from July's 105.7 coupled with a sharp fall in an index of business activity in Chicago. Gold is set to remain in a busy mood as markets await the ECB's decision on interest rates and US weekly jobless figures as well as awaiting tomorrow's non-farm payroll figures. Gold should remain firm as a whole, particularly if the data from the US proves negative over the next couple of days. Gold prices are consolidating in a minor range now between $402-410 as seen in the chart above. A break and daily close above $410 will help move prices into the subsequent trading range. Support should now be seen at $402-405 levels and as long as this level holds we should now see prices testing the channel resistance point at $423. Only a move below $396 will set a bearish undertone. In spite of the recent strength in gold prices, we continue to favour the downside in the medium term as the price structures suggest a sharp reversal once the resistance levels are tested. As we have been maintaining, a break below $380 will see gold headed to its recent lows and possibly even lower to $365-368 levels. We need to alter some of our wave counts internally; however, the bigger picture still remains unchanged. As per our recent count we are in a correction in the bigger picture after the fifth wave failed at $433 unable to cross the third wave top at $431.50 convincingly. A corrective wave "A" began from there and ended at $371. This was followed by a wave "B", which is still in progress looking to top out near $421. A wave "C" will begin from there targeting $365 levels. This will be confirmed after a break of $395. RSI is in the neutral zone now indicating that it is neither overbought nor oversold. The averages in MACD are above the zero line of the indicator suggesting bullishness. Prices are above the short-term 9-day EMA at $406.75 and the medium term 25-day EMA is at $403. Therefore, look for prices to consolidate and test the resistance levels. Supports are at $405, 402 and 398. Resistances at $410, 412 and 415 respectively.
(The author is associated with the Multi Commodity Exchange of India Ltd. The views expressed in this column are his own and not that of his employer. This analysis is based on the historical price movements and there is risk of loss in trading. He can be reached at gnanasekar_thiagarajan@yahoo.com)
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